Switzerland is renowned for its robust and stable financial market, attracting investors globally. However, foreign investors earning dividends from Swiss equities are subject to a withholding tax of 35%.

Fortunately, through Switzerland's extensive network of Double Taxation Treaties (DTTs), eligible investors may reclaim a portion of this tax. This guide provides a comprehensive overview of the process, eligibility criteria, and required documentation for reclaiming Swiss dividend withholding tax. 

Understanding Swiss withholding tax

Swiss withholding tax is deducted at source by Swiss companies distributing dividends: the tax is designed to ensure compliance and is refundable under specific conditions for foreign investors. The standard rate is 35% and applies to dividends, interest, and other specified income types.

Double tax treaties and possible relief methods

Swiss dividend withholding tax may be reduced, or in some situations even eliminated, under Switzerland’s double tax treaties. Generally, the Swiss tax administration (“ESTV”) can refund excess non-resident tax withheld if you complete and send the refund form within the statute of limitations of the country.

Eligibility criteria

Foreign investors can reclaim Swiss withholding tax if: 

• They are residents of a country that has a Double Taxation Treaty (DTT) with Switzerland. 

• They are the beneficial owner of the income. 

• They are able to provide proof of residence and beneficial ownership. 

Exempt organizations, such as certain pension funds and government bodies, may also be eligible for refunds. 

Reclaim procedures

1. Obtain a Tax Voucher 

Before initiating a reclaim, the investor must secure a "Tax Voucher" from their bank or custodian.  A tax voucher is proof provided by a foreign bank to its client that withholding tax has been deducted from the credited amount, enabling the client to reclaim the withheld tax and serving as evidence of the deduction.

This voucher confirms that Swiss withholding tax was deducted and paid to the Swiss Federal Tax Administration.

Please note: 

• Tax vouchers are issued after the income payment. 

• Tax vouchers are mandatory in order to submit a reclaim application. 

2. Complete the Appropriate Reclaim Form 

Investors must submit a country-specific reclaim form, obtainable from the SFTA website (www.estv.admin.ch). Forms are found under: 

Anticipatory Tax > Services > Forms > Domicile abroad (for foreign final beneficiaries). 

Each form must: 

• Be duly filled out. 

• Include bank account details for refund transfers. 

• Be certified by the local tax authority of the investor's country. 

3. Prepare Supporting Documentation 

Typically required documents include: 

• Relevant country specific tax form  

• Certified reclaim form. 

• Tax Voucher(s). 

• Proof of dividend payment  

• Proof of residence (issued by a local tax authority). 

Additional documents may be required depending on the specific DTT between Switzerland and the investor's country. 

4. Submit the Application 

Send the complete reclaim package to the Swiss Federal Tax Administration. Note that: 

• Applications must be submitted no later than 31 December of the third year following the calendar year in which the dividend was paid. Note,  the statute of limitations in Switzerland is 3 years after the end of the year in which the dividends were received. If nothing is submitted within the three years, the right to submit an application is revoked. 

• Internal deadlines by service providers (such as custodians) typically require documentation to be submitted one month earlier. 

Practical Considerations 

• No Relief at Source: Unlike some jurisdictions, Switzerland generally does not allow relief at source for dividend payments to foreign investors. 

• Impact of Errors: Incorrect or incomplete documentation can delay or nullify a refund claim. It is crucial to ensure accuracy and completeness. 

• Residual Tax Credit: In cases where full reclaim is not possible, many countries allow a foreign tax credit for unrecovered Swiss withholding tax. 

In conclusion 

Navigating the Swiss withholding tax reclaim process requires careful attention to detail, timely submission of correct forms, and adherence to eligibility criteria. By leveraging applicable DTTs and following the outlined procedures, foreign investors can effectively mitigate the high Swiss withholding tax burden and maximize their investment returns in the Swiss market. 

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